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Brexit: Scenarios of the movement of the British pound. May, Tusk and Juncker exchanged courtesies

The euro fell in the first half of the day to the area of a minimum amid weak industrial production data, indicating the likelihood of a slowdown in economic growth in 2018. A further bearish trend in the EUR/USD pair gets more real.

Eurozone

According to the report, industrial production in the eurozone in November last year declined more significantly than expected. As noted in Eurostat, industrial production in the euro area fell by 1.7% in November compared with October. This is the biggest drop since February 2016. Economists had expected a decline in production of 1.3%. Germany, where production fell by 1.9%, and Spain, where the decline was marked by 1.6%, were among the leaders in countries where production was falling the fastest.

Thus, the decline in industrial production in many European countries only confirms the weakening of the global economy.

The British pound continues its growth, which, apparently, is still more speculative. Traders positively perceived the information that the Prime Minister of Great Britain today sent a letter to Tusk and Juncker, in which she confirmed her intentions to carry out the decision made during the referendum. However, despite this, May is concerned about the fate of the Brexit deal, which is under threat due to concerns over Northern Ireland. The Prime Minister of Great Britain assured that the EU's concerns about the threat of a rigid border are groundless and negotiations will continue immediately after the vote in the UK. The focus of these negotiations will be on technology that will give up the guarantee of the absence of a rigid border.

In turn, Juncker and Tusk responded to May in the same style, sending her a letter with assurances regarding the Brexit deal, but adding that they would not agree to anything that changes the agreement or does not correspond to it. Juncker also noted that the EU will quickly work on a trade agreement in order to avoid applying the guarantee of the absence of a rigid border in Ireland.

All of these suggest that if the deal with the EU in the framework of a vote does not receive the support of parliamentarians tomorrow, the British pound may remain in the side channel until a final decision is reached since there are a lot of future development scenarios. Starting from the postponement of the exit of the UK from the EU, ending with indiscriminate exit without the adoption and approval of the basic laws.

The prospect of complete abolition of Brexit also has a place to be that will support the British pound when information appears about the next referendum on this matter.

The economic calendar of the foreign exchange market is nearly empty today. Nevertheless, the most important release of the day caused quite a strong resonance among traders. We are talking about the publication of data on the state of China's foreign trade.

The importance of this indicator is due to the general concern of investors about the slowdown in the world economy. Any facts that somehow confirm this concern have a strong impact on the dynamics of trading – both in the currency and stock market. Today's figures once again reminded the market of the consequences of the trade war, which is still ongoing, despite the intention of the parties to conclude a broad deal.

The EUR/USD pair also cannot determine the vector of its movement. The dollar index drifted at the base of 95 points, and the European currency is under pressure from the uncertain prospects of Brexit and negative data on the growth of industrial production in the eurozone. The indicator came out much worse than expected: year-on-year at – 3.3% (with a forecast of -2.2%), and month-on-month at –1.7% (with a growth forecast of 0.3%). In France, this figure subsided due to long-term protests of "yellow vests" in Germany – because of problems in the automotive industry, and a general decline in the entire industry was recorded in Italy.

Conflicting fundamental picture does not allow EURUSD to demonstrate a strong momentum, so traders have to bargain in a flat in anticipation of a strong infopovod. It is obvious that Brexit, or rather today's discussion of this issue in the British Parliament, will become such an occasion.

At the moment, it is known that the European Union has sent a written appeal to London, which assures the British that the subsequent negotiations in the transition period will avoid the use of the backstop mechanism. In the evening, during Theresa May's speech to the Parliament, we will learn the details of this letter, and so far the market is in limbo – and regarding the prospects of the "divorce process", and regarding the prospects of the US-Chinese trade conflict.

On the technical side, the EUR/USD bulls need to gain a foothold above 1.1530 to demonstrate their advantage. In this case, the Ichimoku Kinko Hyo indicator on the daily chart will form a bullish "Parade of lines" signal , increasing the probability of price growth to the borders of the 16th figure. If the general interest in the risk fades, the pair may already return to the average line of the Bollinger Bands indicator on D1, that is, to the level of 1.1410. A break of this level will send the pair to the lower boundary of the Kumo cloud, that is, to the level of 1.1350.

The USD/JPY pair is approaching its support at 109.16 (61.8% Fibonacci extension, 38.2% Fibonacci retracement, horizontal overlap support) where it could potentially bounce to its resistance at 109.66 (61.8% Fibonacci retracement).
Stochastic (55, 5, 3) is nearing its support at 7.6% where a corresponding bounce could occur.
USD/JPY is approaching its support where we expect to see a bounce.
Buy above 109.16. Stop loss at 108.84. Take profit at 109.66.

NZD/USD is approaching its support at 0.6860 (61.8% Fibonacci extension, 23.6% Fibonacci retracement, horizontal pullback support) where it could potentially bounce to its resistance at 0.6936 (horizontal swing high resistance).
Stochastic (55, 5, 3) is nearing its support at 1.65% where a corresponding bounce could occur.
NZD/USD is approaching its support where we expect to see a bounce.
Buy above 0.6860. Stop loss at 0.6796. Take profit at 0.6936.

When the European market opens, no economic data will be released. The US will publish the economic data such as JOLTS Job Openings and NFIB Small Business Index, so amid the reports, the EUR/USD pair will move with a low to a medium volatility during this day.

EUR/AUD is approaching its support at 1.5888 (100% Fibonacci extension, 50% Fibonacci retracement, horizontal pullback support) where it could potentially bounce to its resistance at 1.5972 (50% Fibonacci retracement, horizontal swing high resistance).

Stochastic (89, 5, 3) is nearing its support at 2.4% where a corresponding bounce could occur.

When the European market opens, some economic data will be released such as Trade Balance and Italian Trade Balance. The US will also publish the economic data such as TIC Long-Term Purchases, Prelim UoM Inflation Expectations, Prelim UoM Consumer Sentiment, Industrial Production m/m, Capacity Utilization Rate, Import Prices m/m, and Empire State Manufacturing Index, so amid the reports, the EUR/USD pair will move with a low to a medium volatility during this day.